PATEL LAXMIDAS KARMAN Vs. STATE OF GUJARAT

JUDGEMENT

(1.) THE facts giving rise to this special civil application are as follows :- THE petitioner is a resident of Plasva village in Junagadh District. He is an agriculturist and owns agricultural lands bearing survey numbers situate on the outskirts of Plasva village. THE petitioner is not an authorized dealer or a commission agent and, according to him, he has not carried out any regular business or trade of buying or selling any taxable commodity; and thus none of the provisions of the Bombay Sales Tax Act, 1959 (hereinafter referred to as the Act) applied to him. According to the petitioner, he has never been assessed to sales tax within the State of Gujarat and, therefore, he has no liability to pay any sales tax to the respondents, viz. , the State of Gujarat, the Sales Tax Officer, Junagadh, and the Circle Officer for Sales Tax Recovery. Junagadh. According to the petitioner, he is a creditor of one Bhagwanji Tulsidas, who was the sole owner and proprietor of a concern known as Hari Oil Mills located at Khadia in Junagadh District. It is the contention of the petitioner that this Bhagwanji Tulsidas was indebted to the petitioner in the sum of Rs. 6,750 and since Bhagwanji Tulsidas was not able to pay the said amount, the said debtor agreed to mortgage Hari Oil Mills to the petitioner, and to the mortgage three other creditors of Bhagwanji Tulsidas were joined as co-mortgagees. According to the petitioner, Bhagwanji Tulsidas executed a document signed by himself and under that document Bhagwanji mortgaged Hari Oil Mills in favour of the petitioner and three other creditors. Reserving his right to recover the amount due to the petitioner from the said Bhagwanji, the petitioner has contended that he has not agreed with the said Bhagwanji under the said mortgage document that he himself would discharge the arrears of sales tax due and payable by the said Bhagwanji. According to the petitioner, save and except the relationship of a creditor and debtor, the petitioner has no other business relationship as a partner or otherwise with the said Bhagwanji Tulsidas in the business of the said Hari Oil Mills at Khadia.

(2.) BHAGWANJI Tulsidas, the mortgagor, was assessed to sales tax by the Sales Tax Authorities at Junagadh, regarding the sales and purchases made by him in connection with his business of Hari Oil Mills. BHAGWANJI Tulsidas was heavily indebted and was not in a position to pay the debt due to his creditors or to discharge his liabilities to the Sales Tax Authorities in respect of the tax assessed against him. BHAGWANJI Tulsidas, according to the petitioner, wrote to the Sales Tax Authorities, at the time when the arrears of sales tax were demanded from him, that the petitioner was his partner and the tax due and payable by BHAGWANJI should be recovered from the petitioner. The Sales Tax Authorities knew that on their records there was nothing to show that the petitioner was a partner of BHAGWANJI Tulsidas but still a notice was issued to the petitioner for the recovery of the sales tax dues and payable by BHAGWANJI Tulsidas on the footing that the petitioner was a partner of BHAGWANJI Tulsidas in the business of Hari Oil Mills. The petitioner replied to the said notice and contended that he was not a partner in the business of Hari Oil Mills and contended that BHAGWANJI Tulsidas was the sole proprietor of the business of Hari Oil Mills. The petitioner in this connection relied upon the judgment of the learned Assistant Judge, Porbandar, at Junagadh, in Civil Appeal No. 114 of 1963, decided on 25th August, 1964, and in that appeal in his judgment the learned Judge has held that the petitioner was not a partner in the business of Hari Oil Mills as was contended by BHAGWANJI Tulsidas. This finding given by the learned Assistant Judge was accepted by the Sales Tax Authorities and the notice of demand issued at that stage against the petitioner was withdrawn.

(3.) THE second respondent has filed his affidavit-in-reply and the contentions which have been taken up are on the same lines as the contentions which were taken up in the course of the correspondence that had ensued between the petitioner and the Sales Tax Authorities. It has further been contended that after the mortgage was executed by Bhagwanji Tulsidas in favour of the petitioner and three others, an endorsement was made on the copy of the mortgage deed in possession of Bhagwanji Tulsidas stating that in consideration of the amount of Rs. 23,000, which Bhagwanji owed on the foot of the mortgage to the mortgagees and which he was unable to pay as per the terms of the mortgage deed, he was selling machinery of the mills to all the four mortgagees and according to the second respondent's affidavit, this endorsement regarding the sale of the machinery etc. of Hari Oil Mills for the sum of Rs. 23,000 was signed by all the four mortgagees and this document with the endorsement was produced before the Sales Tax Officer I, Junagadh, by Bhagwanji Tulsidas, and, according to the second respondent, the Sales Tax Authorities were justified in demanding the amount due from Bhagwanji Tulsidas as arrears of sales tax from the petitioner. According to the second respondent under the terms of the document of mortgage, the petitioner had agreed to make payment of Government dues out of the amount of Rs. 6,750 that was payable by him in consideration of the mortgage of Hari Oil Mills belonging to Bhagwanji Tulsidas.